Ten large U.S. banks will finish repaying about $68 billion in bailout money Wednesday, marking a new phase for the most visible government effort to relieve the credit crisis, the Treasury Department said.
Treasury said last week the banks could begin repaying money they received last fall under the $700 billion financial system bailout known as the Troubled Asset Relief Program, or TARP. The program was the centerpiece of the government effort to relieve a global credit crunch and teetering financial markets in October.
The banks have since been negotiating with Treasury over the prices of stock warrants they issued as part of the TARP deal. When Treasury made its initial investments, it received the warrants, which give it the opportunity to buy the banks' common shares in the future at a fixed price. The value of the warrants would depend on the shares' future performance.
The pricing of warrants has been a point of contention, slowing the repayment process. Banks want to pay less to tear up the warrants than Treasury says they're worth. But until banks have bought back the warrants, the banks will remain tied to the federal program. Several banks said they had told Treasury they wished to buy the warrants, officially starting the negotiation process.